Principles Strategy

Price vs. Value in marketing

When is something expensive or cheap? It depends on the value that we perceive in the item or service we’re buying. An object can be both expensive in price, and extremely cheap in value. That shows the struggle between price and value.

Think of price and value as a scale. In a fair trade, the cost of something is in complete balance with the value it provides. When you add to the price, you need to add to the value of the product too. Because if you don’t do it, the scales tip towards a higher price with a smaller perceived value.

Lowering the price to add value.

It’s the easiest way to add value to a product. The problem I have with it? There go your margins. Competing on price is a one-way ticket to a death match where there can be only one winner: The biggest company in the market.

As a small webshop owner, the dumbest thing you can do is trying to compete with Amazon and on price. That’s because they have the advantage of scale to make lower prices work for them. They actively drive competition out of markets by making them unprofitable. 

So what’s a better way to add value?

Tell a better story to justify the higher price.

L’Oréal is a premium brand in a commodity world. Its proposition is the shortest and most effective one I know: Because I’m worth it. When it talks about features or benefits, it frames them in those four short words.

Apple takes it one step further: Its products are exclusive. People line the streets to buy the latest iPhone. Launch events take over the internet. Prices are so expensive that to own one is to say to everyone: I’m successful, I can afford this device.

When my mom needs a new fridge, I tell her to buy at Coolblue. She can buy it for less at a different shop, but I know that Coolblue won’t let her down when something goes wrong. Their story? Everything for a smile. Their vastly superior service is worth 25% surcharge. 

These three companies each use a different story to justify their higher prices. There are countless more examples of ways to add the perceived value of your product.

If people experience your prices as expensive: show them what value you’re providing them. Explain why you care about your product or service. What problems it fixes. Don’t just let it be, show people why they need it. What life would be without it?

Playing with pricing and value is one of my digital marketing principles. The only thing worse than not creating that story around a higher price is having to lower it. Get crafting. 

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